AIRBUS - 2019 Financial Statements

2.4 Airbus Performance Notes to the IFRS Consolidated Financial Statements / 17. Income Tax The expense for income taxes is comprised of the following: (In € million) 2019 2018 Current tax expense (2,903) (477) Deferred tax expense 514 (797) Total (2,389) (1,274) Main income tax rates and main changes impacting the Company: (Rate in %) 2019 2020 > 2020 Netherlands (1) 25.00 25.00 21.70 France (2) 34.43 32.02 25.83 Germany 30.00 30.00 30.00 Spain 25.00 25.00 25.00 UK (3) 19.00 17.00 17.00 (1) A tax law has been enacted in 2019 changing the rate for income taxes from 25.00% to 21.70% as of 2021. (2) A tax law has been enacted in 2017 changing the rate for income taxes from 34.43% to 32.02% for 2019, to 28.92% for 2020, to 27.37% for 2021 and to 25.83% from 2022. This tax law has been amended in 2019 postponing the tax rate decrease to 32.02% to 2020, to 28.4% to 2021 and to 25.83% from 2022. (3) 17% from 1 April 2020. The following table shows a reconciliation from the theoretical income tax (expense) using the Dutch corporate tax rate to the reported income tax (expense): (In € million) 2019 2018 Profit before income taxes 1,064 4,285 Corporate income tax rate 25.0% 25.0% Expected (expense) for income taxes (266) (1,071) Effects from tax rate differentials / Change of tax rate (439) (41) Capital gains and losses on disposals / mergers 21 40 Income from investment and associates 74 76 Tax credit 49 64 Change in valuation allowances (1) (467) (299) Non-deductible final agreements reached with PNF, SFO and DoS (899) 0 Tax contingencies (331) (110) Other non-deductible expenses and tax-free income (131) 67 Reported tax (expense) (2,389) (1,274) (1) Reassessments of the recoverability of deferred tax assets based on future taxable profits. The income tax expense amounts to € -2,389 million in 2019 (2018: €-1,274 million). The high effective tax rate in 2019 is mainly driven by the non-deductibility of the penalties accounted for in the 2019 accounts (see “– Note 38: Litigation and claims”). It also comprises deferred tax impairments and tax risk updates partially offset by the sales of PFW Aerospace GmbH and Alestis Aerospace S.L. at a reduced tax rate (see “– Note 7: Acquisitions and Disposals”). In 2018, the effective tax rate was mainly impacted by non-realised tax losses in the period leading to additional deferred tax asset impairment. This was partially offset by the tax-free sale of Plant Holdings Inc. (see “– Note 7: Acquisitions and Disposals”). As the Company controls the timing of the reversal of temporary differences associated with its subsidiaries (usually referred to as “outside basis differences”) arising from yet undistributed profits and changes in foreign exchange rates, it does not recognise a deferred tax liability. For temporary differences arising from investments in associates the Company recognises deferred tax liabilities. The rate used reflects the assumptions that these differences will be recovered from dividend distribution unless a management resolution for the divestment of the investment exists at the closing date. For joint ventures, the Company assesses its ability to control the distribution of dividends based on existing shareholder agreements and recognises deferred tax liabilities accordingly. 32 Airbus / Financial Statements 2019